Hello, my name is Tim Hawkins. I am with JPMorgan here in San Francisco. I thank you all for coming today. We are excited to have Vical and there will be a breakout session after with Q&A in the Sussex Room which is down the hall into the right and welcome Vijay Samant.

Vijay Samant

Thank you to JPMorgan for inviting us for this conference. Just a disclosure before I go to safe harbor, I have a stomach virus and some kind of respiratory virus so if I cough a little bit that’s sort of the reflection, not the reflection in audience sitting here.

Quickly to our Safe Harbor Statement, I will be making some forward-looking statements, please refer to our files SEC documents, the Qs and Ks to fully understand the risk in investing in Vical. I see a lot of familiar faces and I see some new faces. So for people who don’t know what Vical does, Vical is a platform company with a core technology known as DNA vaccine delivery, where we actually take a ring of DNA, put a gene sequence into the recipe, inject it into the skeletal muscle and the skeletal muscle takes up that gene sequence and expresses that protein or foreign antigen. Whatever is the recipe good for, so if you want to make a necktie of this gentleman sitting on the right hand side, we can take the recipe from his blue necktie and inject it and voila you make a lot of neckties? The immune system then recognize the necktie, creates a memory. So, when the pathogen like him comes in wearing that blue necktie, we destroy him, that’s the concept.

So, you actually use the skeletal muscles cell as a manufacture factory and take the concept of manufacturing from an external manufacturing and internal manufacturing, variety of applications proteins, cancer, infectious diseases.

I am going to focus on three programs in the interest of time. One is Allovectin which is one of the most creative immunotherapy programs; we have been working on it for almost 15 years before Ipi was even conceived. So, just to kind of give you a percept. So we have worked seriously, it’s an intratumoral injection. I will tell you all about it. We have some very important data come out; targeted for the middle of this year.

Cytomegalovirus is a herpes family pathogen, one of the last big vaccine targets left, okay. Now, staph is a big target but the biology of protection for staph is not well understood. This is one of the nastiest herpes vaccines we owned a lot of IP around it. We have two important programs. One is the prevention of reactivation of CMV in patients who are immunocompromised such as bone marrow and solid organ transplant patients. And the second is for prevention of CV infection in females of child-bearing age. This is a prophylactic vaccine. This is the last big target like Gardasil. The first one is known as TransVax, the second one is known as CyMVectin, I’ll go over it a little bit about our partnership with Astellas.

And the third and the most important emerging program that we have in our pipeline is a program for herpes simplex 2, a therapeutic vaccine. We’ve produced some very promising clinical data. You can look at all kinds of data, one out of four, one out of five people are HSV-2 positive, so we have a lot of positive people in this room. The only thing that’s available is Valtrex, you get a lot of genital lesions, people get 10 or 12 replications gentle lesions every year. This vaccine will prevent recurrence of the genital lesions, so we’ll talk about that.

We have a number of validating partnerships with the US government, the navy, Collategene with the Japanese company known as AnGes but in the interest of time today, I’ll not be covering those. You can go to our website.

We’re one of the few companies in Sothern California which is a biological manufacturing facility. We’re very proud of it because if you are successful with Allovectin and CMV, the TransVax program, both those products will be launched through that facility. So, some of you who have not visited San Diageo, please come and visit us, then we have a strong balance sheet.

Allovectin is one of the first in class systemic immunotherapeutics. It was licensed originally from University of Michigan, Gary Nabel is the inventor. We have dosed about 900 patients to date in a variety of phase 1/2/3 trials.

The beauty of this drug is it’s given in an outpatient setting as an intratumoral injection. We give one injection per week, every week for six weeks in a row followed by two week of observation period. So the cycle of treatment is eight weeks. Most patients start showing benefit after two or three cycles, which is about four or six months. And the moral of the story here is in immunotherapy in order for the patient to benefit from immunotherapy, the patient has to be sufficiently healthy for the immunotherapy to work.

Now as I go through this presentation, you’ll see the patient population that we have selected in phase 3 is a homogenous subset population which would benefit from this therapy. It has a unique mechanism of action; I’ll cover that in a minute. Our phase 2 data which I’m going to cover show that this drug is extremely well tolerated, we hope that data is replicated on our Phase 3 study. We have an orphan drug fast track status for this drug. And more importantly we have retained all US and European commercial rights. We have special protocol assessments for our phase 3 from which the data read out is going to be in the middle of this year.

So, what’s the mechanism of action? There are three pathways on how this works in human beings. First is that we encode a gene known as HLA-B7 which is a rare gene in Caucasians. So when you express that gene on the tumor surface, the immune system goes berserk and actually attacks to destroy. But when the immune systems and the T cells are destroying that cancerous cell, they start recognizing the other abnormal markers on that cancer cell and viola after a while when the immune system really understands what's wrong with those markers, it drains through the lymph nodes, talks to the other T-cells, the Jimmy and Johnnies on the other side of the body and while I have a substantive systemic reaction. So we use one tumor which we inject all through as a classroom to teach the immune system what’s wrong with the cancer cell and throughout the treatment, we injected the same tumor unless that tumor goes away.

The other gene there is Beta-2 microglobulin which basically (inaudible) the MHC class 1. Simplistically all the abnormal markers on the cancer cell, some of them are not properly presented with the immune system like the headlight is out of focus. What we do is make sure the headlight is corrected so the soldiers that the T-cells that are patrolling will actually see what’s wrong with the tumor cell and then finally we have cationic lipid which protects the DNA and improves transfection but at the same time accesses the TLR9 pathway. So all these three pathways contribute to how Allovectin 7 works.

Now, some of you may have seen, we recently published data, it’s animal data but if that data holds, it should work very well in humans is when you combine Allovectin with the CTLA mAb in a mouse model, the combination actually works better than CTLA mAb alone which bodes well that if this data holds up the combination with Yervoy should substantially benefit patients.

So, we conducted several trials, I am going to cover one important trial, the phase 2 trial of 127 patients, open label study, single arm, 50% of the patients approximately were stage three, the other 50 were stage four. The key thing is we had no brain mets or liver mets in the patient, M1B patients and the most important marker before anybody jumped on this band wagon, we are using patient with normal LDH, it’s an important marker, lactate dehydrogenase, it tells you how long the patient will last. Higher the LDH, the faster the patient goes independent of tumor burden.

What does the trial show? Good safety, encouraging efficacy. There was not a single grade three or four drug-related adverse event, unheard of in any cancer treatment. The people say well why does that happen? Because we are giving it locally for systemic benefits as supposed to giving it systemically for local benefits. The objective response rate is about 12%, the median survival was about 19 months, that red band that you see around it with an asterisk is to point out that we lost more than 60% of the subjects without completing one cycle or less. Why did we lose patients? Because when you treat cancer patients, even if the therapy is benefiting, a new lesion shows up under standard RECIST criteria, you would be taken off the study.

So, not everybody got that benefit. Now, that number 18.8 months is on an intent to treat basis. In our phase 3 study we were smart. We modified the RECIST criteria. So patients can get two cycles of treatment even if a new lesion shows up as long as the doc believes that the patient is benefiting from the treatment and that modification is an SPA and I know some of you are cancer docs here may know that the Agency is not going to come out with a RECIST criteria for immunotherapy which basically follows the guideline that we have on our SPA.

The dotted line shows the intent to treat patients and that’s all the patients and you have about 18.8 months which I’ve pointed out to you. The blue curve is the responders. Seven and a half years into the study, half the responders were alive. So, good correlation between patients who respond and go on to live longer. Now these patients in the study 127 patients were combination of chemotherapy and chemo refractory patients. If you call out just the chemo naïve patients because they have a healthier intact immune systems, their median survival is 22 and half months. And the reason I’m pointing that out to you is because in our phase three study we’re actually using chemo-naïve patients. So this number is going to be better than 18.8 months, will be closer or north of 22.5 months, so assuming everything goes well.

We had 15 responders, 11 complete, four partial. We’re comparing apples and oranges here. We got Allovectin on one side and got Yervoy from another study. So you got to be careful.

But take a look, no hydration, no premedication, no withdrawals for toxicity, a third of the melanoma patients who are age 70, do you think they’re going to take this? This is a tough drug and you know there is a lot of excitement on the PD1s and PDL1s, that’s not a cake walk either. I mean it’s better than this what the early data that we have seen. But if we show efficacy what we showed in phase 2 or even better and show this safety profile, it’ll create a paradigm shift in terms of how melanoma is treated.

So, what have we done in the phase three study to improve our chances of success? First, I told you we had picked a homogeneous group of patients, no brain mets, no liver mets, healthier patients. We pick chemo-naïve patients, why chemo-naïve, because chemo-naïve patients have healthier intact immune systems, patients with normal LDH, with all the LDH we’re going to central labs. So there is no lab to lab variation. So, it’s a pretty tight LDH range that we have here.

Then we modified the RECIST criteria. This is a key modification from the phase 2 study. So, patients will get at least two cycles of treatment. Why is that important? Because more Allovectin we believe will improve the survival prognostics of our patients and finally we have designed this study to capture the benefits of immunotherapy.

Our primary end point is response rate; the secondary end point was survival. Survival is a very important end point because there’s been a shift in the landscape right now. But we are measuring response rates six months after randomization and it needs to be confirmed at least four weeks after the first measurement.

If somebody is going to jump up and say I just saw the New England Journal of Medicine, Ipi article and the response rate was 8%. Let me tell you, that’s the best response rate that captures response in the first six months, it’s not adjudicated. Our response will be captured six months and beyond it will be adjudicated; I have been showing this script for a long time, now everybody is starting to believe it.

This is depending on where you measure; you will get a different article. We are going to be measuring at this part of the curve and actually if you look at the original (inaudible) study which was a phase two SPA study, they failed on response rate because they measured response rate too soon.

So, little bit on the design of the phase three study. 390 subjects all recruited in January of 2007. Recruitment was completed in February of 2010. Half the patients we recruited in the first two years, the remaining 50 were recruited in the last year. We have about 90 sites worldwide, big centers are US, Europe. Israel has been a big recruitment center and Brazil; we have not gone to Australia.

The study is randomized 2:1, 216 the treatment arm, 113 in the control arm. The study is not blinded to the doctors or physicians but blinded to us, why is that? Because we gave our drug intratumorally. The control is given either orally or intravenously. So, doctors and patients know how the drug is doing. We don’t. And the beauty of this is despite the fact the study is not blinded to the patients, our dropout rates have been low. We haven’t published those, but we know what our dropout rates are and one of the key things because we have gone to the right centers, we've gone to some of the red states, the rural centers, not New York city, not [MDN] [ph] where patients are too smart to walk out if they get randomized in the chemo arm.

We have a two year treatment period that means if you are a stable disease or a partial responder, you continue to get the drug for almost two years. Now, you need to ask how many patients have gotten [the drugs in for] [ph] two years to your oncology specialist. Likelier than any patient getting chemotherapy for two years is low, so likelihood of Allovectin being given for two years is very high and the study actually lasted two years. The last patient actually came off two years after the last patient was recruited.

Now, we are behind on the data, and people say why are you behind on the data. Vijay what’s going on here? Well you need to understand, the way we predict when the event rate is going to occur, is based on the slope of the curves. The initial slope of the curve was such that we thought the data was going to come out sometime towards the end of 2011, then the slope of the curve changed, meaning the target event rate slowed down. Then we changed it, it changed further. There is no way to predict it, but some people are saying well you got healthy patients in the phase 3 study versus phase 2. Well, that’s not true, take a look. We just published the data. We’re actually more stage four patients. 63 versus 48. We have more tumors burden in this phase 3 study and take a look on median age, 64. Assignment to all of you, go and look at the Ipi study and tell me what that median age in that study is? So, we are treating really sick patients here. Half of our patients are age 64, you would expect them to die sooner, exactly opposite has occurred.

So, these are the two ends points. There is 90% power to detect a 10% difference in response rate. It’s 90% power to detect, the survival difference between 18 and 11 months. 18 was based on our phase 2 data, 11 based on the historical survey that we did on the (inaudible). The number of six to 11 months, we pick 11 because we have healthy set of patients.

So, what’s going on? Can the control arm be living longer? Maybe, because the standard of care of treating patients has improved, maybe the number is slight higher than 11 months. Do we expect synergy with the new therapies under (inaudible)? And the answer is no. Somebody may ask, well, Vijay wait a minute. When you are conducting the trial, there was (inaudible) studies were going on, maybe they were getting you, after they progress from your study they were getting this drug. The answer simply no because if you go again to the New England General Medicine articles, those were in treatment naive patients and even in the chemo refractory you couldn’t recruit a patient if it was enrolled in a study were survival is the end point.

The first time EP was available was in the March-April-May time period 2011, in the US in September for (inaudible) that is four and half years after our study started. Compassionate news to our knowledge was minimal. So, yeah there may be some synergy but only 65 patients need to die to reach median survival in this group.

On the Allovectin on the hand, the original number was 18 months, but they were all comers. The chemo-naïve group is 22.5 months. The modified RECIST criteria that should impact the number positively. Impact of new therapies, we've shown in mass model the synergy of that holds in humans, that should impact the number. Can the number be greater than 22.5 months? That’s one logical way to explain why the invent rate is not occurring?

So, we complete the sweep of our sites till September of this year. Sweep as you call up all the sites and say, is John Doe alive, Jane Doe alive, so you get a real time head count of how many patients are dead, how many patients are alive and based on that event rate or really the event count, we had to postpone our thinking that the data is not going to be available at the end of our year and we’re targeting now for the data to be available middle of this year, 2013.

And the second end point which is the response rate, there is adjudication, we have a radiological at adjudication, we have oncological adjudication and that takes time, we expect that to occur sometime towards late first quarter of this year. Our goal is to un-blind both pieces of data simultaneously. So the speculation that we have knowledge of any pieces of data is not true because the data is a third party places, blinded, it’s score, even the radiologist and the oncologists who are adjudicating that, they are doing it in a blinded fashion. Nobody has any knowledge of the data, not me, other than god.

This is the timeline, this data adjudication we hope to complete by middle of 2013. We hope we are going to reach the target around the same point in time and we expect to unblind the data at the same period of time, so that’s really the time of allovectin-7.

The last point which I have not put a slide up, we’ll cover that in our earnings call. What’s the commercial opportunity? Pretty large commercial opportunity. You know there are a lot of patients who have fallen into the category of the third of the melanoma patients, fall into the trial, recruitment and entry criteria and if the drug indeed shows the safety and efficacy markers in phase 3 study, it will be a drug of first choice because you can always go on Allovectin, you always then have the ability to take the (inaudible). It doesn’t work the other way around because by the time you progress from (inaudible) you are far out there and Allovectin wouldn’t have time to work.

Quickly, I got about six minutes left. CMV, herpes family, three of them nasty bugs okay. There are same like chicken pox, CMV cytomegalovirus, herpes simplex 2, herpes simplex 1, this is the calm one, but this is the nastiest one, everybody probably is positive in this room when your immune system is compromising, it comes, attacks everything inside your kidneys, your liver, your eyes, name it. It’s a nasty bug and it’s a big problem in transplant patients who have protective immunity against but when you wipe out their bone marrow, you take the memory and take the immunity away. And when you get the new bone marrow, you need to teach that new immune system how to fight that CMV that’s hiding in the body and that’s exactly what our vaccine does.

Our vaccine is a synthetic vaccine which acts like a live alternative vaccine. It has a glycoprotein which gives you an antibody immediate response and a core protein that give T-cell response both arms of the immune systems, bullets and soldiers. And that’s why we had produced some wonderful data on our phase 2 study, I am not going to cover that but you can go, it’s published in (inaudible) it’s licensed fully to Astellas. Astellas is going to spread the entire money developing this program. It should be entering phase 3 in a worldwide study in US, Europe and Japan. They know the transplant market. Prograf is their big drug. They don’t know enough about vaccines. So we bring the vaccine expertise so it’s a perfect marriage. The program is paid by them. We have high double digit royalties but the next program really symmetric. This is the last big target, females, child barring age, you get CMV infection during pregnancy, it’s a leading cause of birth defect in the United States. Go to YouTube tonight and do a search on CMV and you’ll see parents with kids born with CMV, so you know how tough the disease is. This is what rubella used to be in the 50s. So, and the biology of protection in controlling of CMV is pretty well understood unlike staff or some of the other disease or hepatitis C or to that matter AIDS.

So, it’s a big market. We have an active R&D, we’re talking to a whole bunch of partners. I can’t promise when the partnership is going to be but there is a lot of traction on this particular drug. I covered CMV but I think the most important thing is there’ll two studies of phase 3 registration study, a phase 2 trial in (inaudible) recipients and you know we have an option to co-promote in the United States, double digit royalties from day one. All expenses paid, it’s a beautiful partnership.

40,000 cases of congenital C immune infection every year in the United States. This is serious problem and most people, most females of child barring age don’t even know what their CMV status is. And once you get CMV infection during pregnancy, if you’re CMV negative, there’s not much you can do about it. So, this is a big opportunity, and you know the agency just conducted a workshop. We were invited along with the four big Pharma companies to come with a good surrogate marker to do a proof of concept study. Because unless you get a proof of concept because then it’s a very large study and you have to follow all these females for a number of years. So, the minutes of those meeting should be coming out which would clear a pathway with the agency how to go forward with this study.

We have an R&D allowed and we’re exploring partnering opportunities. We own a lot of IP around CMV both on the gene sequences, the formulations and also product and species patterns.

Herpes simplex, herpes simplex 1 is cold source, herpes simplex 2 is gentle lesions, take a look 40 to 65 million in United States. Once we start this trial, we’ll be able to recruit the trial in two days. That’s how eager people are to get into this trial. There is nothing available right now, Valtrex is the only thing used the compliance is bad, the recurrence is terrible and 80% of the people are asymptotic.

So, people who are positive and don’t lesions are passing it on without knowing it. It’s a serious problem, and Africa its almost one out of two people is positive to HSV-2, big problem. So, what are we doing in the interest of time where others have failed? Well, most of the vaccines that have been tested before have been glycoprotein based vaccines which only generate an antibody immediate response. So, what we have done is besides the antibody immediate response is we along with (inaudible) lab, University of Washington have partnered to commit two gene sequences which augment T-cell responses and we invoke both arms of the immune system to control the pathogen.

Okay, Vijay you’ve got a good vaccine, tell me how it’s going to work in humans. Now, there is a very good model available to test this vaccine in guinea pigs. So we tested this once. We got great results. People say maybe it’s a fluke, test it again. We tested it second time. all that data by the way is published and its shown here that we were able to show in guinea pigs the P value of less than 0.05 in a therapeutic setting, in a prophylactic setting, we invoked sterilizing immunity. You know what sterilizing immunity is? You vaccinate something and you challenge them with a lethal dose and then by PCI you cannot detect the pathogen. That’s how quickly the immune system clears it. It’s like the holy grail of vaccinology. Vaccinology start dancing when they get this sterilizing immunity because you really get it and humans is almost impossible to get. You will probably get it in hepatitis A but not most of the vaccines in hepatitis B, other you still don’t get it. So we expect to advance this program in the second half of this year and this trial should read out on about 12 to 15 months. It’s a proof of concept phase 1 last to study.

Financially, we are in great shape, we have great shareholders, some of them are in the audience. We ended the quarter with $92 million in cash. So we’ll have substantial cash at the end of the year. We would also have substantial cash by the time the data reads out on Allovectin-7 middle of this year. Our projected 2012 net cash burn was about 18 to 20 and we achieved that. We have no debts, no warrants, financially well positioned, we have a terrific board, we have a terrific scientific advisory board. Members of my management team have actually done drug development. So, it’s not a paper company on Park Avenue. Real company, come down to San Diageo and see us.

So, in terms of upcoming milestones, data on Allovectin in mid-2013, the TransVax programs both phase 3 and phase 2 starting this year, herpes simplex going and advancing to phase 1/2. so people who have not invested in Vical, it’s a platform technology with a broad intellectual property. A phase 3 study which is going to read out and if the data is good, it could be a grand breaking immunotherapy. We are putting all the efforts beyond the herpes simplex to program to move in the clinic fast. Astellas put a substantial amount of resources to get both those studies going and they should be starting immediately.

And then finally, we run the company with a fiscal and financial responsible. Thank you.

Question-and-Answer Session

[No Q&A session for this event]

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